United States: Telemarketers, Payment Processor To Pay $1.7 Million to FTC

Last Tuesday, a federal court in Orlando issued its final order in a years-long legal
battle between the Federal Trade Commission (the "FTC" or
"Commission"), a number of telemarketers and their
payment processor. The ruling follows an order late last year that
granted the Commission's motion for summary judgment against
all remaining participants in the allegedly deceptive robocall
credit card interest rate reduction venture.

Which of the defendants' alleged marketing, debt relief and
payment processor activities caught the FTC's attention?

Debt Relief and Telemarketing Practices

According to the Commission, the defendants marketed their
credit card interest rate reduction services to consumers
throughout the country through use of prerecorded telemarketing
calls. The FTC alleged that the subject defendants often claimed
that their interest rate reduction services would provide savings
of $2,500 or more and enable consumers to pay off their debt three
to five times faster. During or immediately following these calls,
the defendants purportedly charged consumers a fee of up to $1,500
for debt relief services.

Originally filed in October 2012, the Commission's lawsuit
accused the defendants of conducting unfair and deceptive business
practices in violation of the FTC Act by:

Misrepresenting that consumers would save money, lower their
credit card interest rates and pay off their debts faster by
purchasing their debt relief services;

Misrepresenting that consumers would not be charged fees until
after services had been performed; and

Making telemarketing calls that delivered a prerecorded message
without each consumer's express informed consent;

Making outbound calls to telephone numbers on the National
Do-Not-Call registry;

Failing to pay fees associated with access to the National
Do-Not-Call registry;

Failing to honor consumers' do-not-call requests; and

Failing to disclose the identity of the seller, the marketing
purpose of the call and/or the nature of the services offered.

Payment Processor Services

The FTC expanded its lawsuit in June 2013 to include eight new
defendants, including a payment processor that the Commission
states assisted in the alleged fraud. Payment processors, such as
the defendant Universal Processing Services of Wisconsin, LLC d/b/a
Newtek Merchant Solutions ("Newtek"), are entities that
process credit or debit card transactions between merchants and
consumers.

According to the FTC, Newtek and its president Derek Depuydt
committed separate violations of the TSR by assisting and
facilitating the other defendants' purportedly unlawful
telemarketing activities.

Defendants Agree to $1.7 Million Judgment and Long-Term
Bans

Although most of the defendants had already
agreed to enter into settlement, the Florida federal court
granted an FTC motion for summary judgment against Newtek and the
remaining two telemarketing defendants Hal E. Smith and HES
Merchant Services Company, Inc. ("HES") in November
2014.

With last Tuesday's final order, all three remaining
defendants are jointly and severally liable for the $1.7 million
judgment. Additionally, Smith and HES received 20-year bans on
robocalling and marketing debt relief products or services, while
Newtek is permanently prohibited from processing payments for a
wide range of clients.

Telemarketers and Payment Processors Take Heed

As this matter demonstrates, significant regulatory action
awaits non-compliant telemarketers – and the parties who work
closely with them. These businesses should familiarize themselves
with applicable regulations and maintain a strict regimen of
compliance standards.

If you are interested in learning more about this topic, or if
you have been served with legal process relating to your debt
relief, telemarketing or payment process or practices, please
e-mail us at info@kleinmoynihan.com or call us at (212)
246-0900.

The material contained herein is provided for informational
purposes only and is not legal advice, nor is it a substitute for
obtaining legal advice from an attorney. Each situation is unique,
and you should not act or rely on any information contained herein
without seeking the advice of an experienced attorney.

Callers—often businesses—face the inconvenience of not being able to reach the intended recipient when the recipient's telephone number was disconnected and then reassigned to another telephone subscriber

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